The Cato (CATO) AI Stock Analysis

• Market Cap: $56.27M
• Dividend Yield: 27.98%
• Average Volume (3M): 38.05K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.37
• Revenue Growth: -8.23%
• EPS Growth: 13.66%
• Country: US
• Employees: 7,000
• Sector: Consumer Cyclical
• Sector Strength: 72
• Industry: Apparel - Retail
• EPS (TTM): 0.17
• Shares Outstanding: 18,049,747
• 10 Day Avg. Volume: 31,297
• 30 Day Avg. Volume: 38,054
• PEG Ratio: 0.05
• Price to Book (P/B): 0.41
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -2.15
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0

• Rating: 44 Neutral
• Price Target: ―

The overall stock score for The Cato is 44, indicating significant challenges. The most significant factor is the company's financial performance, which shows declining revenue, negative profitability, and liquidity issues. Technical analysis further suggests a bearish outlook with the stock trading below key moving averages. Valuation is problematic due to a negative P/E ratio, despite a high dividend yield that may not be sustainable. Strategic changes are needed for a turnaround.

The Cato Business Overview & Revenue Model

Company Description

The Cato Corporation, together with its subsidiaries, operates as a specialty retailer of fashion apparel and accessories primarily in the southeastern United States. It operates through two segments, Retail and Credit. The company's stores and e-commerce websites offer a range of apparel and accessories, including dressy, career, and casual sportswear; and dresses, coats, shoes, lingerie, costume jewelry, and handbags, as well as men's wear, and lines for kids and infants. It operates its stores and e-commerce websites under the Cato, Cato Fashions, Cato Plus, It's Fashion, It's Fashion Metro, and Versona names. As of January 29, 2022, the company operated 1,311 stores in 32 states. It also provides credit card services to its customers, as well as layaway plans for customers who agree to make periodic payments. The company was incorporated in 1946 and is headquartered in Charlotte, North Carolina.

How the Company Makes Money

The Cato Corporation generates revenue primarily through the sale of women's fashion apparel and accessories. Its business model is centered around operating retail stores under its three brands: Cato, Versona, and It's Fashion, each targeting different customer demographics and price points. Revenue is primarily driven by in-store sales, with an additional stream coming from its e-commerce platform, allowing customers to shop online. The company maintains a diverse product assortment, frequently updating inventory to reflect current fashion trends, which helps to attract and retain customers. Key factors contributing to Cato's earnings include strategic location of stores, competitive pricing, and a strong focus on customer experience. The company's revenue is affected by seasonal trends, economic conditions, and consumer preferences.

The Cato Financial Statement Overview

Summary

The Cato Corporation's financial performance is weak, with declining revenues and profitability. The income statement score is low due to decreasing total revenue and negative margins, indicating operational inefficiencies. The balance sheet shows moderate stability, but with reduced equity and assets, posing financial risks. Cash flow challenges are evident with negative free cash flow, highlighting liquidity issues.

Income Statement

The income statement shows declining revenue and profitability. The TTM data indicates a significant decrease in total revenue compared to previous years, with negative net income and negative EBIT and EBITDA margins, reflecting operational challenges and declining profitability. The company has struggled to maintain gross profit margins, which have decreased significantly from previous years.

Balance Sheet

The balance sheet reveals moderate stability with a manageable debt-to-equity ratio, although equity has decreased over time. The company's total assets have declined, but the debt levels have reduced proportionally. However, the equity ratio has decreased, indicating a shift in financial structure that may pose risks if not managed carefully.

Cash Flow

The cash flow statement shows negative free cash flow in the TTM period, highlighting cash flow challenges. Operating cash flow has been negative, indicating potential liquidity issues. The free cash flow to net income ratio is unfavorable, reflecting inefficiencies in cash conversion from earnings.

Breakdown
TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Income Statement		Total Revenue
666.78M	708.06M	759.26M	769.27M	575.11M	825.34M
	Gross Profit
218.88M	243.74M	249.60M	316.21M	141.92M	316.43M
	EBIT
-21.33M	-9.00M	1.84M	38.80M	-75.92M	37.14M
	EBITDA
-9.85M	-3.90M	12.94M	49.25M	-57.94M	53.13M
	Net Income Common Stockholders
-26.13M	-23.94M	29.00K	36.84M	-47.48M	35.90M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
224.88M	102.95M	128.66M	165.76M	143.93M	212.21M
	Total Assets
504.80M	486.82M	553.14M	633.77M	591.45M	684.98M
	Total Debt
0.00	153.12M	174.77M	184.33M	206.74M	210.33M
	Net Debt
-36.79M	129.18M	154.76M	164.57M	189.23M	198.51M
	Total Liabilities
182.12M	294.50M	326.55M	379.57M	344.95M	368.46M
	Stockholders Equity
322.68M	192.32M	226.59M	254.20M	246.50M	316.51M
Cash Flow		Free Cash Flow
-33.23M	-12.05M	-6.06M	55.68M	-44.67M	45.09M
	Operating Cash Flow
-24.46M	477.00K	13.37M	59.79M	-30.71M	53.40M
	Investing Cash Flow
35.14M	19.78M	16.02M	-25.33M	64.51M	-22.63M
	Financing Cash Flow
-16.05M	-16.13M	-29.28M	-31.80M	-27.18M	-41.57M

The Cato Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 2.84
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CATO, the sentiment is Positive. The current price of 2.84 is above the 20-day moving average (MA) of 2.52, above the 50-day MA of 2.75, and below the 200-day MA of 3.95, indicating a neutral trend. The MACD of 0.01 indicates Negative momentum. The RSI at 57.00 is Neutral, neither overbought nor oversold. The STOCH value of 49.89 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CATO.

The Cato Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RGS	65 Neutral	$53.10M	0.57	548.07%	―	-4.88%	―
Sector *	62 Neutral	$6.88B	11.26	2.78%	3.93%	2.65%	-22.00%
DLTH	47 Neutral	$68.39M	―	-22.43%	―	-3.10%	-381.92%
CATO	44 Neutral	$56.27M	―	-14.32%	27.98%	-8.23%	13.66%
PLCE	43 Neutral	$137.29M	―	-521.67%	―	-13.49%	63.10%
TLYS	43 Neutral	$27.59M	―	-37.62%	―	-8.61%	-33.30%
VRA	41 Neutral	$59.19M	―	-28.34%	―	-20.99%	-976.24%

The Cato Corporate Events

The Cato Secures New Credit Facility with Wells Fargo

On March 13, 2025, The Cato Corporation entered into a new asset-based revolving credit facility agreement with Wells Fargo Bank, replacing a prior credit agreement from May 2022. This new facility allows for up to $35 million in credit, with potential expansion to $50 million, and will support the company’s working capital and general corporate needs. The agreement includes various financial covenants and restrictions, ensuring the company’s obligations are secured by its assets. The facility matures in 2028 and offers flexibility in borrowing and repayment terms, impacting the company’s financial operations and stakeholder interests.